All you need to know about management discipline?
A long-term study has examined a total of 160 companies and over 200 management practices over a period of five years. The result was the <4 + 2 formula> for sustainable business success, which recommends the use of four binding management methods in combination with two optional management methods. If you analyze the literature, there are numerous recommendations for the design of performance management projects and large-scale scientific studies. The management disciplines critical to success have identified that lead to long-term success. A long-term study that examined a total of 160 companies and over 200 management practices over a period of five years particularly stands out. The study aimed to determine whether certain patterns concerning the management methods and tools used could be identified in the companies that have been shown to have remained financially successful over a total period of 10 years.
<4 + 2 formula> as the best recipe for sustainable success
The result was as simple as it was astonishing: Companies that permanently followed a certain combination of management methods are more than 90% likely to be financially successful in the long term. The authors called this combination the «4 + 2 formula» for sustainable business success.
At the same time, it was shown that there is no single, all-encompassing management method or the general concept of success. Rather, a harmonious amalgamation of different management disciplines and practices is required to achieve top performance in the long term, which is also associated with certain degrees of freedom in combination options for companies. In the following, the management disciplines of the 4 + 2 formula, which are critical to success, are outlined.
The four bindings (primary) management disciplines
The "4 + 2 formula" for sustainable business success essentially consists of the following four bindings (primary) management disciplines, which must be applied equally.
1. Strategy development
It works, regardless of whether it is aimed at prices or at innovative product development, especially when it is precisely defined, clearly communicated, and understood by employees, customers, partners, and investors alike.
2. Strategy implementation / execution
The operationalization of the strategic alignment is effective as long as operational processes can run as efficiently as possible, error-free, and smoothly. It is not crucial to always completely satisfy customers, but rather not to disappoint them.
3. Culture optimization
On the one hand, work has to be fun so that employees like to get involved. On the other hand, this should also go hand in hand with high demands on providing services. Both should be reflected either in the corporate culture, the existing management, and incentive systems or in the efforts to optimize culture.
Optimization Improvements inefficiency in terms of organizational structuring according to products, geography, customers, etc. can be important. Such efforts optimize the structure and reduce the company's level of management and significantly simplify the work as a whole.
The four optional (secondary) management disciplines
From the following four disciplines, only two have to be chosen and applied arbitrarily.
1. Talent optimization
Successful companies manage to keep and motivate talented high potentials in the company in the long term and, at the same time, to acquire and develop new talents in the company.
Optimization Agile companies develop innovative products and services by aligning their efforts to anticipate negative and disruptive developments in the market or within their business area. In doing so, they act primarily in a proactive way instead of just reacting to new situations.
Optimization Choosing the right leadership or suitable managers with an effective leadership style can significantly increase a company's performance. The exchange between employees’ at all hierarchical levels and the potential for recognizing problems and opportunities must be intensively challenged and promoted.
4. Mergers and partnerships
All management disciplines presented so far are geared towards achieving internal performance optimization in the sense of performance management. However, it turns out that companies that successfully merge with other companies or enter into strategic partnerships are also successful in the long term.
How to improve your management quality
If companies are above average successful in the long term, they usually have a management system that promotes and demands top performance. It is important to build and develop with passion over many years of work.
Master the seven management disciplines
The implementation of a holistic management and control system must be based on defined management disciplines - in other words, characteristics that distinguish management and its actions. These need to be clearly defined and built up within the company. A precise description of the behavior patterns in which these disciplines appear is also required.
The seven fields of action and management disciplines when striving for management excellence are:
- focus the processes and employees on the strategy,
- integrate strategic improvement programs,
- Strategically concentrate resources,
- provide relevant information in real-time,
- Strategically develop the employees,
- achieve the required performance in day-to-day business and
- institutionalize strategic learning.
The following applies to most high-performance or management excellence companies. They laid the foundation stone for their management system many years ago, built up the management disciplines mentioned in a targeted manner, and continuously expanded. Because of this persistence, perseverance, and continuity, a culture of values and performance emerged in your organization that has an inspiring and coordinating effect on all employees.
Make sure the top management proves leadership.
Excellence companies attach great importance to leadership - usually referred to as "leadership." They see leadership as a prerequisite for the existence of a management system. Their leadership culture corresponds to this. Your (top) managers
- communicate openly and understandably,
- ensure clearly defined tasks and responsibilities,
- Consistently push ahead with the implementation of the agreements,
- show great stamina in everyday work and
- demonstrate the corporate principles to their employees.
Focus on consistent implementation
High-performance companies know that the best strategy is of little use if it is not implemented consistently. Accordingly, they pay particular attention to strategy implementation. That means they make sure that:
- The (corporate) goals are consistently broken down to the lowest level,
- The agreed goals are clearly formulated, measurable and realistic, and
- Focus on the essential goals ("less is more") in everyday operations.
They also consider it a key success factor that
- Every employee can understand his contribution to achieving the strategic goals,
- All employees and areas work in the same direction
- Every employee and department knows what is expected of him and what has to be done.
The action focuses on key issues and improvement programs and projects that are derived from the strategic objectives. Good companies place a special burden on their managers. They expect a particularly high level of consistency and discipline from them. Because their ultimate responsibility is to ensure that:
- The implementation of the requirements is top-down and result-oriented and
- There is prompt bottom-up feedback on target achievement and current performance.
Develop your own management system
All high performance-Companies have developed their own company-specific management approach. This means that they did not adopt concepts and procedures without thinking about them. They use proven methods such as Six Sigma, Balanced Scorecard, EFQM model, and SWOT analysis. However, based on this, they developed their own management system and refined it over the years and standardized it in a company-specific manner. They do not reinvent the "wheel," but neither do they adopt a one-to-one approach. Rather, it is adapted to one's own interests, cultural characteristics, and achieves goals.
This can also be seen in (real-time) reporting. High-performance companies attach great importance to corporate management, but at the same time, they make sure that the effort for the provision of data and information is kept as low as possible. The data quality has priority. They make the reporting instruments and systems easy to use. Simplicity and practicality is the key.
Demand and encourage employee engagement
Good companies attach great importance to employees. One of their credos is: The human factor decides about success and failure. Your personnel management is aligned with the strategic requirements, and personnel development, as well as training and further education, are systematized. For example, the company's individual positions are stored with competence profiles, and the employees are specifically developed based on these target profiles.
High-performance companies also know that there is a close connection between their employees' (job) satisfaction and performance. That is why they attach great importance to performance-related remuneration. Bonus systems also often play a major role in their remuneration policies. However, they have the right to these systems: they have to be comprehensible and transparent, and the goals have to be realistic and measurable.
Excellence companies also value the (early) involvement of employees at all levels and their active participation, including strategy implementation. In addition to the individual employee and feedback discussions, they attach corresponding importance to the management, department, and team meetings. These also have the function of ensuring that:
- The actions of employees and areas concentrate on the essentials
- "Weaknesses" and target-actual deviations are recognized early so that the necessary countermeasures can be initiated.
The regular meetings should also improve cooperation and promote "team spirit" so that weak points, problems, and errors are addressed more openly and quickly, and the necessary learning and improvement processes are initiated.
Be aware of the fruits of your commitment.
High-performance companies are absolutely convinced: management systems have a positive influence on management quality and corporate success and are a permanent competitive advantage.
The study's conclusion shows that companies should pursue a mix of six different disciplines and integrate them as part of a holistic management system to optimize their performance and be successful in the long term.
But even if the integration of various management aspects is undoubtedly not easy to accomplish, the crucial question is why so many companies fail in their efforts to optimize performance. This question is the focus of the next section, which deals with the problems with the implementation of performance management systems.
Author: Vicki Lezama